By Na Jeong-ju
Staff Reporter
Shinhan Financial Group will combine its two credit card subsidiaries _ LG Card and Shinhan Card _ and launch a new card unit on Oct. 1, the group said Thursday.
The new new card firm, which has been named Shinhan Card, will be Asia's largest card issuer with more than 13 million subscribers. The firm will also become one of the top 10 card issuers in the world.
Shinhan will see its credit market share in the country jump to 25 percent, followed by Kookmin Bank's card unit, KB Card, with 17 percent.
``We will focus on creating synergy among Shinhan Bank, Shinhan Card and 11 other subsidiaries to become the country's top financial services group,'' a Shinhan Financial official said. ``It is time to pursue greater success by developing more consumer-oriented products and finding new growth engines based on synergy effects.''
Utilizing LG Card's strong sales network, Shinhan Card plans to adopt aggressive marketing strategies to become a dominant leader in the card market. The country's second largest financial group has narrowed the gap with its archrival, Kookmin Bank, this year, threatening to overtake Kookmin in terms of assets and profitability.
``The merging of LG Card and Shinhan Card is crucial to achieve our goal of becoming the country's top financial services provider,'' Shinhan Financial CEO Lee In-ho said in a speech marking the sixth anniversary of the group on Sept. 3.
The group said the merge will help Shinhan secure a mid-to-long-term growth engine.
``With the positive outlook for the credit card industry, our business will emerge as a major cash-cow,'' Lee said.
Analysts say the launch of Shinhan Card will cause much stiffer competition in the card industry and prompt issuers to develop more consumer-oriented products.
``If Shinhan Card and LG Card are fully merged, other credit card firms may stage aggressive marketing to compete with Shinhan,'' said Bae Jong-hyun, an analyst at Dongbu Securities. ``Their competition may raise concerns about credit default risks, but the issuers are likely to focus on expanding their customer bases for the time being to survive the competition.''
The Financial Supervisory Service forecast card companies will continue enjoying robust growth until next year.
Shinhan said it will take some time to combine the electronic banking systems of LG Card and Shinhan Card, although they will be able to share customer information for joint businesses until then.
Analysts worry the merge will significantly raise labor costs for Shinhan, and if not handled properly, this will hamper the group's long-term growth.
Early this month, the union of LG Card voted to take action against management and block the merge with Shinhan Card, citing discriminative measures against LG Card employees.
The union has opposed Shinhan Financial's personnel management plan saying it is aimed at laying off LG Card employees. It said it will stage a walkout and demand the resignation of Shinhan Card CEO Lee Jae-woo unless the firm ensures the job security of all LG Card employees.